Weather Derivatives

Weather derivatives are financial instruments that can be used by organisations or individuals as part of a risk management strategy to reduce risk associated with adverse or unexpected weather conditions. The difference from other derivatives is that the underlying asset (rain/temperature/snow) has no direct value to price the weather derivative. Farmers can use weather derivatives to hedge against poor harvests caused by drought or frost; theme parks may want to insure against...

Weather derivatives are financial instruments that can be used by organisations or individuals as part of a risk management strategy to reduce risk associated with adverse or unexpected weather conditions. The difference from other derivatives is that the underlying asset (rain/temperature/snow) has no direct value to price the weather derivative. Farmers can use weather derivatives to hedge against poor harvests caused by drought or frost; theme parks may want to insure against...

MUMBAI: This one promises to give general insurance companies sleepless nights. Foreign banks are exploring ways of issuing quasi-insurance products to domestic corporates, bringing them into direct competition with insurance companies in the country. Some of these banks have been speaking to corporates across industries for the issue of products such as catastrophe bonds and weather derivatives. Catastrophe bonds have been traditionally used by insurance companies abroad to save on...

MUMBAI: This one promises to give general insurance companies sleepless nights. Foreign banks are exploring ways of issuing quasi-insurance products to domestic corporates, bringing them into direct competition with insurance companies in the country. Some of these banks have been speaking to corporates across industry for the issue of products such as catastrophe bonds and weather derivatives. Catastrophe bonds have been traditionally used by insurance companies abroad to save on...

MUMBAI: If your business is bogged down by the vagaries of weather, here's some good news for you. Following the Budget, there are moves to launch a weather-trading platform. So, if you are in the power utilities, retail, farm product and vending business, you can henceforth hedge your risks against unfavourable climate conditions. The trading platform would allow one to buy or sell the value of a temperature and precipitation (rain)

SINGAPORE: The estimated $7.5 billion economic loss from China's devastating snow storms ? not to mention the loss of at least 60 lives ? underscores the need for weather derivatives in China. Encouragement of (or, for that matter, tolerance for) financial innovation may have fallen to a new low following the unraveling of securities tied to US subprime mortgages. Which emerging-market central banker can now be blamed for taking a hawkish stance on credit...

MUMBAI: Foreign banks are looking at ways to issue quasi-insurance products to corporates, a move that will bring them into competition with insurance companies in the country. Some banks are in talks with corporates for the issue of catastrophe bonds and weather derivatives. Firms in the beverage, frozen food, construction, agriculture and utilities businesses are expected to benefit from weather derivatives. Many companies have already responded positively to these instruments.

MUMBAI: With the rains just around the corner, speculators who are now active in the unorganised market, will find a more secure place to bet on the monsoons ? the National Commodity and Derivatives Exchange (NCDEX). NCDEX has developed a rain index ? a new tool to track the monsoon's progress with support from the government's Met office and the Indian Meteorological Department (IMD). Once the index is allowed to trade as a derivative, farmers are bound to...

Ask an Ethiopian peasant what would most improve his life, and he is unlikely to mention weather derivatives. Nonetheless, some brainy people at the World Food Programme (WFP), the UN body charged with saving the starving, think they could save more people by using arcane financial instruments. A typical famine might unfold like this. First, the rains fail. Then the harvest fails. Then people start to go hungry. After a while, the television cameras arrive. Western...

With Europe sweltering this month, anyone selling ice cream or electric fans should be making money at a furious pace. But pity companies that make chocolates and sweaters? Not necessarily. More and more firms know that hedging can shield their businesses from the effects of extreme weather. Heineken, Coca-Cola and Munich's Oktoberfest, for example, already hedge against unusual temperature swings. The Weather Risk Management Association, an international trade group, says that weather...

With Europe sweltering this month, anyone selling ice cream or electric fans should be making money at a furious pace. But pity companies that make chocolates and sweaters? Not necessarily. More and more firms know that hedging can shield their businesses from the effects of extreme weather. Heineken, Coca-Cola and Munich's Oktoberfest, for example, already hedge against unusual temperature swings. The Weather Risk Management Association, an international trade group, says that weather contracts last year paid out...

MUMBAI: More than 200,000 farmers and a few corporates, who are exposed to the vagaries of fluctuating rains, are breathing easier this monsoon. General insurers such as Iffco-Tokio, ICICI Lombard, HDFC Chubb and Agriculture Insurance Company (AIC) have covered over two lakh farmers, with microfinance organisations and other rural institutions helping farmers to pay their premiums. Buoyed by the success of weather insurance, the government is considering a proposal to allow two more innovative...

MUMBAI: With the rains just around the corner, speculators who are now active in the unorganised market, will find a more secure place to bet on the monsoons ? the National Commodity and Derivatives Exchange (NCDEX). NCDEX has developed a rain index ? a new tool to track the monsoon's progress with support from the government's Met office and the Indian Meteorological Department (IMD). Once the index is allowed to trade as a derivative, farmers are bound to benefit the most.

NEW DELHI: The National Commodity and Derivatives Exchange (NCDEX) can offer trading in weather derivatives in the country, according to its CEO, PH Ravikumar. He told a seminar organised by IRADe-IIEF today, there can be a strong demand for such derivative product. He said the exchange is in favour of positioning the product as a hedging instrument for farmers, and added that it has the necessary infrastructure to offer it. The exchange is planning to link up with panchayats to...

Ask an Ethiopian peasant what would most improve his life, and he is unlikely to mention weather derivatives. Nonetheless, some brainy people at the World Food Programme (WFP), the UN body charged with saving the starving, think they could save more people by using arcane financial instruments. A typical famine might unfold like this. First, the rains fail. Then the harvest fails. Then people start to go hungry. After a while, the television cameras arrive. Western donors, moved by...

Ask an Ethiopian peasant what would most improve his life, and he is unlikely to mention weather derivatives. Nonetheless, some brainy people at the World Food Programme (WFP), the UN body charged with saving the starving, think they could save more people by using arcane financial instruments. A typical famine might unfold like this. First, the rains fail. Then the harvest fails. Then people start to go hungry. After a while, the television cameras arrive. Western donors, moved by pictures of...

MUMBAI: If your business is bogged down by the vagaries of weather, here's some good news for you. Following the Budget, there are moves to launch a weather-trading platform. So, if you are in the power utilities, retail, farm product and vending business, you can henceforth hedge your risks against unfavourable climate conditions. The trading platform would allow one to buy or sell the value of a temperature and precipitation (rain)

Ask an Ethiopian peasant what would most improve his life, and he is unlikely to mention weather derivatives. Nonetheless, some brainy people at the World Food Programme (WFP), the UN body charged with saving the starving, think they could save more people by using arcane financial instruments. A typical famine might unfold like this. First, the rains fail. Then the harvest fails. Then people start to go hungry. After a while, the television cameras arrive. Western donors, moved by...

With Europe sweltering this month, anyone selling ice cream or electric fans should be making money at a furious pace. But pity companies that make chocolates and sweaters? Not necessarily. More and more firms know that hedging can shield their businesses from the effects of extreme weather. Heineken, Coca-Cola and Munich's Oktoberfest, for example, already hedge against unusual temperature swings. The Weather Risk Management Association, an international trade group, says that weather...

With Europe sweltering this month, anyone selling ice cream or electric fans should be making money at a furious pace. But pity companies that make chocolates and sweaters? Not necessarily. More and more firms know that hedging can shield their businesses from the effects of extreme weather. Heineken, Coca-Cola and Munich's Oktoberfest, for example, already hedge against unusual temperature swings. The Weather Risk Management Association, an international trade group, says that weather contracts last year paid out...